Based on preliminary figures, a total of 218 mergers and acquisitions were announced in 13 sectors of the health care industry in the first quarter of 2003. This represents a nearly one-quarter (24%) drop in activity from the previous quarter, but a 3% gain from the deal-making in the year-ago quarter, Q1:02. The contribution of each sector to this total appears in the table below. The four sectors of the health care technology segment combined posted 132 deals, or 61% of the total. The three most active sectors, Pharmaceuticals, Medical Devices and Biotechnology, together accounted for 56% of all health care M&A activity. And Pharmaceuticals alone posted 23% of the entire quarter’s deal volume. Among the service sectors, only Long-Term Care and Home Health broke into double digits, with 22 and 11 deals, respectively. Most disturbingly, the Hospital sector, long the anchor of the health care services segment, posted just four deals, down 73% from the previous quarter and 71% from the year-ago quarter. Laboratories, also one of the more active service sectors during 2002, fell off from the previous quarter’s level by 59%. What They Paid Based on prices reported to date, a total of $13.5 billion was committed to fund the 218 deals in Q1:03, an increase of $1.2 billion, or approximately 10%, over the $12.3 billion spent in Q4:02. That figure also represents an 82% increase over the $7.4 billion spent in Q1:02. The chart opposite displays what percentage of these funds each sector garnered. Due to the low levels of interest and capital they were able to attract, the Laboratories, Physician Medical Group (PMG) and Home Health sectors have been combined. While the health care technology segment typically garners a larger portion of the available funds than the health care services segment, the disparity in Q1:03 was acutely lopsided. A total of $12.34 billion, or 91% of the total, was spent to finance the 132 deals in health care technology. By comparison, during Q4:02, the technology segment attracted 55% of the total committed that quarter, while during Q1:02, it attracted 59%. Q1:03 had three billion-dollar deals, Q4:02 had two and Q1:02 had one. During Q1:03, the Pharmaceuticals, Medical Devices and Biotechnology sectors posted one billion-dollar deal each. The health care M&A market appears on track to post between 850 and 900 deals this year, and to spend in the neighborhood of $50 billion to do so. Uncertainty over the duration of reconstruction in Iraq and how it is to be paid for, as well as a foundering economy on the domestic front, will act as a drag on the market in the short term.